‘The model can’t hold’: Publishers face content studio growing pains

Many publishers have looked to so-called native advertising as the silver bullet for publishers as display ads lost effectiveness, so they’ve fired up content studios to create campaigns that mimic editorial. Ad tracker MediaRadar found more than 1,000 sites selling native advertising, up from 218 publisher sites in 2015. For some publishers, native is now the biggest source of their ad revenue.

But the growth obscures just how hard the content studio business is, due to high content creation, overhead and distribution costs as well as rising competition. If running a display ad on your own site is nearly all profit, the margin on a branded content campaign could easily be half that, said Paul Rossi, president of The Economist Group.

“If you look at the real challenge of native advertising, it’s really more about the margin than the revenue,” Rossi said.